Stocks Seeing Continued Weakness In Mid-Day Trading - U.S. Commentary

4/13/2012 11:56 AM ET

Stocks continue to see significant weakness in mid-day trading on Friday after showing a notable move to the downside earlier in the session. Renewed concerns about corporate earnings and the outlook for the global economy are weighing on the markets.

The major averages have climbed off their worst levels of the day but remain firmly in negative territory. The Dow is down 73.41 points or 0.6 percent at 12,913.17, the Nasdaq is down 32.08 points or 1.1 percent at 3,023.47 and the S&P 500 is down 10.34 points or 0.8 percent at 1,377.23.

The pullback on Wall Street, which comes after stocks posted strong gains in the two previous sessions, is partly due to disappointing economic news out of China, the world's second largest economy.

Data released by the Chinese National Bureau of Statistics showed that Chinese economic growth slowed to 8.1 percent in the first quarter from 8.6 percent in the fourth quarter. Economists had expected a more modest slowdown to 8.4 percent.

Traders have also reacted negatively to quarterly results from JP Morgan (JPM) and Wells Fargo (WFC), which are moving lower despite reporting better than expected first quarter earnings.

JP Morgan reported first quarter earnings of $1.31 per share, well above analyst estimates for $1.18 per share. While the company also reported a 6 percent increase in total revenues, investment banking revenue fell by 11 percent.

Meanwhile, Wells Fargo reported first quarter earnings of $0.75 per share on revenues of $21.6 billion compared to analyst estimates for earnings of $0.73 per share on revenues of $20.4 billion.

Following the release of the results, shares of JP Morgan are down by 2 percent, while shares of Wells Fargo are down by 1.9 percent.

Some negative sentiment has also been generated by a report from Reuters and the University of Michigan showing an unexpected deterioration in U.S. consumer sentiment in the month of April.

The report showed that the preliminary reading on consumer sentiment in the month of April fell to 75.7 compared to March's final reading of 76.2. Economists had expected the index to come in unchanged compared to the previous month.

A separate report from the Labor Department showed an increase in consumer prices in the month of March that matched economic estimates.

Sector News

Banking stocks have moved sharply lower on the heels of the news from JP Morgan and Wells Fargo, with the KBW Bank Index down by 2.2 percent. With the loss, the index is pulling back toward the one-month closing low it set on Tuesday.

SunTrust (STI), Regions Financial (RF), and Bank of America (BAC) are turning in some of the banking sector's worst performances in mid-day trading.

Considerable weakness is also visible among oil service stocks, as reflected by the 2.2 percent loss being posted by the Philadelphia Oil Service Index. The weakness in the sector comes as crude for May delivery is sliding $0.45 to $103.19 a barrel.

Steel stocks are also posting notable losses on the day, moving back to the downside after rising sharply on Thursday. The NYSE Arca Steel Index is down by 2 percent and surging up by 4.7 percent in the previous session.

Biotechnology, networking, and healthcare provider stocks are also under pressure, moving lower along with most of the major sectors.

Meanwhile, the major European markets came under considerable pressure on the day. While the U.K.'s FTSE 100 Index fell by 1 percent, the German DAX Index and the French CAC 40 Index tumbled by 2.4 percent and 2.5 percent, respectively.

In the bond market, treasuries are moving back to the upside after closing lower in the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5.8 basis points at 1.991 percent.